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Some people will run only one or two VPS's on dedicated hardware so they effectively get the same benefits of dedicated but with the flexibility of VPS's. Overhead is not really a factor when you are using something like OpenVZ which only adds maybe 2-3%. Makes sense if everything else you do is VPS that way you are consistent across all your hardware.

As I am sure most of you do like me I start off with shared hosting (about to upgrade to a VPS) then slowly work my way up to a dedicated server

When do you consider moving to a dedicated solution is mandotory? After 50,000 visitors a day or what?

Just thought this would be quite interesting.

If you are talking about hosting a website, this depends on too many factors to give you a number.
What do you do on this website?
Is it mostly text or images + scripts and animations?
Do you have login/sessions/multiple concurent connexions?
Is your software optimized?
5K per day may require a dedicated server for a certain site while a VPS could handle another which has 60k per day.

It all depends on the use, not the users

But on another note some questions might point it out:
Is the load on the VPS high?
Is your website loading fast or not?
Does it sometimes crash because of too many users?
Etc
Hope this helps a little!

Long answer:
Not only is there enough information to figure how much performance your website may need to handle X number of pageviews, as ubservers pointed out, but there is no hard line between "VPS performance" and "dedicated server performance". Looking just at RAM, a VPS plan or dedicated server can run the whole gamut from 64MB VPN or DNS slave material to 16GB "serious business" and beyond. Likewise, the CPU can range from long-ago-era P4s to the latest Sandy Bridges. The disk oft-ignored disk array and the I/O performance it provides is crucial to many sites, and it can be configured in any number of ways.

Dedicated has always made sense to me, regardless of traffic amount. I generally stay away from VPS's because I like to have total control of my server, and I don't like storing valuable data alongside other users--a breach in security for one user could mean problems for all.

That said, I do use VPS's for certain things, but more often than not I prefer dedicated servers because you are free to run them however you want--custom kernels, etc...

If your decision is simply based on performance, you could conceivably always stay on some sort of VPS/cloud and just continually upgrade service to more cores/ RAM. However, you should probably think about doing some form of upgrade when your uptime load average is running about 0.75 (or greater--remember to adjust for multi-cored systems) for the 15min average.

You can also consider running in the Amazon EC2 and figure out EXACTLY how much that bad boy is going to run you. Then you can do a cost benefit and see if that $300+ dedicated server is value added. No need to scale past what you actually need. Go cloud until it's too much then go dedicated. Cloud gets expensive on intensive apps but if you can swing a low amount of ram it might get you home.

This completely depends on what your website is all about, the things you are serving up, the actual CPU and memory resource required for each visitor to be served. Not just this, your email usage loads, databases, FTP activity, other cron jobs running together at any given point of time will also have to be considered. As has been rightly pointed out earlier, it is not the number of users, it is what each users does which would determine when to move to a dedicated server.